Question: Assume a consumer with the utility function U = U(X, Y) = (X + 2)(Y + 1) and the budget constraint (M = 95, Px

Assume a consumer with the utility function U = U(X, Y) = (X + 2)(Y + 1) and the budget constraint (M = 95, Px = 10, and Py = 5) 95 = 10X + 5Y

a. Decompose the price effect into substitution effect and income effect when price of X falls to 5 from 10.

b. Also identify if the goods X is normal or inferior or giffen.

c. Also show the decomposition in the graph

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